Social Security Tax Changes for 2012

The future of Social Security taxes for employees is uncertain, but one certainty is the fact that the 2011 payroll tax holiday is set to increase in March under current law. A list of some of the other Social Security changes workers and retirees will experience this year is below:

• More than 60 million Americans will see a 3.6% increase in their Social Security payments in 2012. Most retirees will see a $43.00 per month increase.
• The Social Security tax cap has increased to $110,100 in 2012, up from $106,800 in 2011. According to the Social Security Administration, an estimated 10 million high-earners will pay higher taxes due to the increase in the tax cap.
• The Temporary Payroll Tax Cut Continuation Act of 2011 extended the 2% payroll cut that workers received in 2011 through the first two months of 2012.  Until February 29, 2012, close to 160 million workers will continue to have 4.2% (as opposed to the usual 6.2%).
• Employees who earn over $18,350 during the first two months of 2012 must pay a 2% Social Security tax on the pay they earned between $18,350 and $110,000.
• Fifty cents of each dollar earned over $14,640 in 2012 by Social Security recipients who are below the full retirement age will be withheld for Social Security payments. Thirty-three cents of each dollar earned over $38,880 will be deducted from monthly payments for Social Security retirees who will turn sixty-six this year.
• In 2012, the maximum possible Social Security check will increase to $2,513 per month, up from $2,366 in 2011. In order to receive this amount, the employee would need to earn the maximum taxable amount ($110,100 for 2012) each year after he turns twenty-one.

See Emily Brandon, 5 Social Security Changes Coming in 2012, U.S. News, Jan. 23, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.